If Imports were Truly Bad for an Economy, Military Blockades would Not Exist

In discussions of international trade, thepervasive mind-set is that exports are a positive entry in a country’s “economic well-being” ledger, while imports are a negative entry in the ledger. In other words, exports are intrinsically “good” and imports intrinsically “bad.”

Who hasn’t heard that imports “destroy” jobs while exports “create” jobs? Likewise for imports being “dumped” on Americans. Ditto for imports being likened to “invading foreign armies.” In international trade negotiations, countries grant import “concessions” only if their trading partners reciprocate with “concessions” of their own. That is, countries grudgingly import in order to export, not the other way around.

In my many years of teaching the essentials of international economics to university sophomores, I found that virtually all of them were afflicted with this mind-set. Against this backdrop, I enjoyed asking students about what Abraham Lincoln’s (who was a lifelong protectionist) northern states did to Confederate seaports during the War Between the States. Despite students’ general historical illiteracy, some were able to correctly respond that the North blockaded these seaports to keep Confederates from importing goods and services. Next question was: did this help or hinder the Confederacy’s war effort? To which the students responded: “It hurt their war effort.”

At this point the students had fallen into a glaring contradiction. To wit, if imports are harmful to a nation’s economic health, then the northern states’ blockade of Confederate seaports, by reducing Confederate imports, strengthened the Confederacy. Yes, that [is] what it means. Which, in turn, suggests that Lincoln was an unwitting agent for the Confederacy! This is absurd.

Some students, probably attempting to save face, pointed out that the North’s blockade also deterred Confederate exports (primarily cotton). Did this harm the Confederacy? Yes, but not because exports are intrinsically good and less of them would be harmful. Exports, by themselves, represent goods and services leaving the Confederacy. What’s intrinsically beneficial about having fewer goods and services available, particularly when you’re trying to fight a war?

The problem here is that the popular mind-set regarding exports and imports is bogus! Rather than imports being intrinsically bad and exports intrinsically good, the truth is just the opposite. Lincoln escaped this popular mind-set only once in his political career when he undermined the Confederacy by blockading its harbors. In doing so, he anticipated the late 19th century economist Henry George’s observation that nations do to their citizens when peace prevails what they do to their adversaries during wartime.

None of the politicians/ commentators, together with their business/labor allies, who peddle this economic nonsense about exports and imports behaves in their personal lives as they suggest the nation posture itself with respect to the rest of the world. Indeed, their income earning activities (their exports) enable them to buy things produced by others (their imports). Hopefully, lots of imports. The more the better, in fact. Their exports—that is—their incomes, are what enable them to do this. The bottom line is that people in their private lives export in order to import.

If actions speak louder than words, we should look at what our politicians/commentators and their business/labor cohorts do when managing their own affairs, not the affairs of the nation. It demonstrates Adam Smith’s insight in his 1776 classic, The Wealth of Nations: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”

This article was originally published at Mises.org. T. Norman Van Cott, an adjunct scholar with the Indiana Policy Review Foundation, is professor of economics at Ball State University, Muncie, IN.